Where did all of the drugs go?
For the past year or so, the US has been grappling with a dire drug shortage crisis. With the number of drugs in short supply reaching a peak since 2014 at the beginning of this year, healthcare providers and patients across the country continue to reckon with the consequences. These drug shortages, which particularly concern generic drugs and, among those, anti-cancer drugs, can adversely affect patient care, leading to delays, complicated rationing criteria, alternative treatment options, and increased costs. Responding to executive and congressional efforts to address this problem, the Centers for Medicare and Medicaid Services (CMS) released a proposal in July aimed at mitigating the vulnerability of the pharmaceutical supply chain. Yet, the proposal’s plan to financially support the development of buffer stockpiles within hospitals has nevertheless faced numerous critiques.
At the risk of over-emphasizing, drug shortages in the US are widespread. According to a June 2023 ASHP survey, a shocking 99% of US hospital pharmacist respondents are experiencing drug shortages, among which nearly one-third of cases were deemed “critically impactful,” requiring pharmacists to ration, delay, cancel, or use an alternative treatment (1). With 240 drug shortages in the US as of today, chemotherapy drugs continue to lead the pack (2). In fact, according to a recent NCC survey, 72% of centers are experiencing a shortage of carboplatin, a chemotherapy used to treat ovarian cancer, and 59% are experiencing a shortage of cisplatin, a chemotherapy for bladder, ovarian, lung, cervical, and testicular cancers (3). With many patients delaying treatment or receiving at-times less effective or more costly alternatives, these drug shortages threaten to alter the course of otherwise curable or manageable diseases. Furthermore, the increased workforce strain required to manage these drug shortages is significant, totaling to an estimated 8.6M personnel hours and $360M in labor costs per year (4).
Although we have reached a nearly historic moment, drug shortages in the US are not new, nor are they surprising for many. Even before the COVID-19 pandemic, the majority of hospitals reported more than 20 drug shortages at any one time (5). While the pandemic undoubtedly exacerbated the situation, it also shed light on an already-fragile pharmaceutical supply chain. In other words, problems seeding within the complicated supply chain—consisting of suppliers, manufacturers, distributors, and group purchasing organizations (GPOs)—predisposed our healthcare system to the crescendo of drug shortages that we now face. Aside from somewhat typical supply chain risks, like an overly complicated system in which a failure at one node cascades into downstream effects, the drug shortage crisis is thought to stem from a few key factors.
First and likely most important: the difficult economics of generic medications. Given intense competition and high investment requirements, many generic manufacturers operate with exceptionally thin margins. While competitive forces that drive prices down are great for patients, they leave manufacturers with little capital to invest in ensuring the stability of their processes. As we are witnessing today, with generic drugs accounting for nearly 90% of all prescriptions filled in the US, supply chain vulnerabilities due to often-unsustainable business models pose a risk to a large swath of the patient population (6). The importance of generic manufactures became glaringly evident earlier this year, when Akron Pharmaceuticals filed for bankruptcy. As one of the largest generic manufacturers in the US, Akron’s closure pulled 75 generic drugs from the market and caused other generic manufactures to struggle to fill the gap. Needless to say, in a system plagued by exorbitant costs, the uniquely low costs of generic drugs are vitally important to patients. However, the economics under which generic manufacturers operate must be recognized, with steps being taken to secure their supply chains internally or externally, in order to avoid such ripple effects in the future.
Tangentially, a core element of the pharmaceutical supply chain’s fragility is the lack of manufacturing redundancy, diversity, and quality control. The US currently relies heavily on China and India for sourcing of active pharmaceutical ingredients (APIs) and key starting materials (KSMs), as well as for manufacturing sites. In 2021, for instance, 78% of API suppliers were located in China, India, and the EU (6). Although these settings often provide lower costs, which particularly help generic manufactures operate under thin margins, they are also often less regulated, with more quality control issues. For instance, the suspension of India-based Intas Pharmaceuticals due to a scathing FDA inspection this past summer has been a significant contributor to the ongoing shortage of cisplatin.
Lastly, despite the various complexities, vulnerabilities, and multiplicity of stakeholders, the pharmaceutical supply chain has historically operated with a “just-in-time" approach to inventory management. With little buffer room—in terms of storage and time—disruptions at certain points in the supply chain can be catastrophic at the provider-patient level. Interestingly, it is primarily this last point that the CMS addresses in its July proposal (CMS-1786-P) (5). According to the proposal, “hospitals’ procurement preferences directly influence upstream intermediary and manufacturer behavior and can be leveraged to help foster a more resilient supply chain for lifesaving drugs and biologicals.” As such, to combat the traditional “just-in-time" inventory-management structure, the CMS is proposing to provide financial support to hospitals for establishing and maintaining a three-month buffer stock of essential medicines (namely, the 86 essential medicines outlined by the Essential Medicines Supply Chain and Manufacturing Resilience Assessment). This proposal could be finalized as early as next month, with an effective date starting January 1, 2024.
Despite widespread acknowledgment that action is urgently needed, there have been several concerns about this policy proposal. Importantly, developing these stockpiles without a clearly defined phased approach would likely, and ironically, exacerbate supply shortages in the near-term, with manufacturers unable to meet the heightened demand. Furthermore, given that the proposal only covers a portion of the inventory holding costs, and not the cost of the actual drugs, low-income and rural hospitals would likely not be able to bear the financial cost, even with the policy’s support.
Although developing an effective solution to the drug shortage crisis has proven to be as complicated as the supply chain itself, continued awareness and efforts among governmental, regulatory, and private organizations mark a step in the right direction. With the number of drug shortages slowly decreasing since the turn of the year, however, it remains vitally important that this opportunity to create sustainable change, no matter how difficult, is not swapped with near-sighted complacency.
Fierce Healthcare. “Sweeping drug shortages force health system pharmacists to adjust treatment, purchasing, survey finds.” Aug 2023.
ASHP. “Current Drug Shortage Bulletins.” Oct 2023.
NCCN. “NCCN Best Practices Committee Drug Shortage Follow-Up Survey Results.” Oct 2023.
AHA. “AHA Responds to Request for Information on Drug Shortages.” Jul 2023.
CMS. “CMS-1786-P.” July 2023.
NBC News. “How one U.S. drugmaker contributed to the escalating drug shortage crisis.” Jul 2023.